New coverage options for beneficiaries of Medicare could dramatically alter the relationship the government health program has had with providers and senior citizens for more than three decades.
Under the new options, included in the federal budget legislation President Clinton signed into law last week, beneficiaries who want the freedom to choose their providers, and are willing to pay for the privilege, will be able to do so beginning Jan. 1, 1998.
One option will permit beneficiaries to drop out of the standard Medicare program and enter private contacts with providers for selected services. For example, a senior citizen who wants to be treated by a high-priced brain surgeon can agree to pay that specialist more than Medicare would.
Under current law, providers cannot charge beneficiaries more than Medicare allows, even if the patients are willing to spend their own money. Most industry observers expect the first option to have a minimal effect because only a small number of people can afford to drop their Medicare coverage.
But the second option carries more potential for wide participation. It allows Medicare beneficiaries to enroll in private indemnity insurance plans that give them more latitude in selecting providers. Medicare will pay the insurer a capitated amount. If the insurer charges a premium higher than the Medicare rate, the difference will be charged to the beneficiary. No limits will be placed on the amount of the premium as long as the insurer can actuarially justify the added cost. The insurer then will publish its provider payment schedule. The private rates cannot be lower than Medicare payments except in very limited circumstances.
Providers will be able to charge Medicare beneficiaries a premium of up to 15% above the insurer fee schedule. For example, if a Medicare beneficiary with private coverage were treated by a doctor or hospital, the provider would bill the insurance plan directly. If the insurer paid $1,000 for the service, the provider could charge the beneficiary another 15%, or $150, above the insurer's rate.
The options' primary supporters are the American Medical Association, which supports fee-for-service medicine, and the National Right to Life Committee. The latter group fears that as Medicare tightens its budget, care will be rationed to the point where seniors will die.
Those opposing the plan say it will open the door for physicians to seek private fee-for-service patients at the expense of beneficiaries in the traditional Medicare program.
"The only way this makes sense is if it is a conspiracy whereby doctors can get together and only take new Medicare patients who sign up for a private fee-for-service plan," said one healthcare lobbyist who asked not to be identified.
The Clinton administration opposed the provisions for the same reasons. "We have deep concerns that . . . people won't know they can be charged anything and that providers will go into private fee-for-service and not give people a choice," HHS Secretary Donna Shalala said. She added that there could be "extraordinary human tragedies with these programs."
Proponents of the plan say current antitrust laws and competitive markets would make it impossible for physicians to avoid patients with traditional Medicare and a Medicare HMO.
Others say it is the first step toward an overhaul of the Medicare program from a defined benefit plan to a defined contribution plan. Rep. Bill Thomas (R-Calif.), chairman of the House Ways and Means health subcommittee, supports the private fee-for-service option and agrees that it changes the fundamental structure of Medicare.
It's unclear how many beneficiaries will choose a private fee-for-service plan. The Congressional Budget Office, which often estimates the potential effect of legislative proposals, didn't project enrollment for the plans. Researchers said there was too much uncertainty to make a reliable projection.